TrueValueMetrics ... Impact Accounting for the 21st Century


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Date: 2024-09-27 Page is: DBtxt001.php L0700-TPB-c2003-Process-Changing-State-1

TPB thinking circa 2003
ACCOUNTING FOR IMPACT

PROGRESS is the increase in VALUE (of the STATE) from beginning to end of the period


Simply measure the change in the VALUE or everything

CONVENTIONAL ACCOUNTING IS VERY POWERFUL
HOWEVER ... conventional financial accounts ONLY describe economic activity in financial or money terms while completely ignoring impact on everything else ... that is the 'externalities' ... that is the impacts on SOCIETY and the impacts on the ENVIRONMENT, the other dimensions of the complete SOCIO-ENVIRO-ECONOMIC SYSTEM.

Profit and Loss Account

For most company managements and investors, there is a singular focus on profit performance. In order to optimize for profit, the revenues must be maximized and all the costs minimized.

Many managements argue that the only responsibility that they have is to maximize value increase for stockholders, no matter what the impact on social capital and natural capital. This has been the guiding principle of management responsibility for most of the last hundred years.
In recent years there has been growing concern that this is not enough, and companies do have some degree of responsibility with respect to both society and the environment.

The graphic below shows the relationship between the Balance Sheet at the beginning of the period (BOP) and the Balance Sheet at the end of the period (EOP) and the Profit and Loss Account (P&L Account) for the peiod.

A core feature of double entry accounting is that the change in the balance sheet from the BOP to the EOP is the same as the profit for the period shown by the P&L Account

ACCOUNTING FOR IMPACT
How the TVA architecture adds IMPACT in an easy and rigorous manner

Conventional financial accounting does not have the concepts and tools to number social and environment impacts. This is what TVM sets out to do.

Start with Conventional Financial Accounts and add the GOOD impacts to the accounting, analysis and reporting

Deduct the BAD impacts to the accounting, analysis and reporting

Combine GOOD and BAD impacts together

The text being discussed is available at

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TrueValueMetrics (TVM) is an Open Source / Open Knowledge initiative. It has been funded by family and friends. TVM is a 'big idea' that has the potential to be a game changer. The goal is for it to remain an open access initiative.

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